Cost of Capital
Free CFA Level II lesson in Corporate Issuers. 12 min read, ~1,766 words.
WACC uses target capital structure weights, not book values. Pure-play method: Unlever with the comparable's tax rate and D/E. Relever with the subject firm's tax rate and D/E. Country risk premium (Damodaran) = sovereign yield spread x (equity vol / bond vol). Flotation costs go to the initial cash outflow...
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What this lesson covers
- Content
- Example 1
- Example 2
- Common Mistakes
- Key Takeaways
- Exam Shortcuts
Learning objectives
- cost of capital
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